Most beginning economics textooks will say something like "markets work well for many things, but not for the environment, because there is no way to internalize the costs of pullution."  But is that really true?  Is there not a way to internalize the costs of pollution into doing business, or have we just chosen not to?

First of all, we need to discuss what it means to "internalize costs."  Let's say I want to build a car to sell and make a profit.  I believe I can sell the car for $20,000, so to make a profit, I have to be able to build it for less than that.  So I add up all my costs, rent, wages, materials, etc, and if they come to less than $20,000, I know that it's worth it to build the car.  Let's take just one of those costs, say, steel.  I know that if the cost of steel is below a certain price, I will build the car, and if it is above, I won't.  But what can we know about the cost of steel?  Well, if the cost is high, it's because other businesses are buying steel for other products that they expect to be able to sell at a profit, even with the high cost of steel.  If it's low, it's because other businesses don't think that consumers want to buy the things they would make out of steel for the price they would have to sell it to make a profit, even with the low cost of steel.  So in general, we can say that if I can build a steel car and sell it for a profit, it is because society generally values using the steel more for the car than for other things it could be used for.  Because my profit relies on the cost of steel, that is, that I have "internalized" the cost of steel, markets have done a pretty decent job of applying steel to it's best use.

The problem, though, is that when I fire up my coal factory to make that car, I don't have to pay anybody to send the smoke out.  Regardless of whether or not I send out dirty smoke, killing my neghbor's farm crops and causing asthma in children, my profits stay the same, because I never see a price for that.  On the contrary, if I am a good soul and choose to develop smoke filters and other means to reduce my pollution, my profits will most likely go down due to the added expense of developing that technology.  I will be able to compete less well with those carmakers that take the easy way and do pollute, and eventually, if I can't cut costs somewhere else, I will go bankrupt.  New regulatory ideas such as carbon credits or cap and trade systems are attempting to deal with this issue, but they still run into problems determining the true costs of pollution.

So how did we get to this point?  Is it true that it is impossible for free markets to deal with pollution?  To understand this, we need to go back more than 150 years, to the beginning of American industrialization.  In the early 1800s, people were not concerned with pollution on the grand scale, as we are today, simply because they could not imagine that a few coal-fired factories here and there could ever possibly have global consequences.  When people did worry about pollution, they did not cosider themselves to be environmentalists, per se, but were concerned with simple property rights violations.  For example, a farmer would see his haystacks go up in flames from sparks from a passing train, or see his fruit trees blighted by smoke from a nearby factory.  He was not concerned the harm to nature so much as the harm to his livlihood and his ability to feed his family.

And early on, the solution was simple.  Go to court, show a violation of property rights, and get compensation and an injuction against further violation.  The factory owner the had a number of options.  He could develop some new technology to limit his pollution, he could buy up a whole lot of land where he had no neighbors to offend, or he could simply work out a contract with the farmer to pay him a sum of money that would convince the farmer to let him pollute.  In any case, his expenses would go up and be passed on to the consumer, and any competitor that found a way to produce the produc without pollution would see lower costs and higher profits.

Unfortunately, not everyone saw this as a good thing.  Nearing the middle of the century, it was feared that America would fall behind the rest of the world, and that the way to stay competitive was rapid industrialization.  Anything that stood in the way of this was seen as risking American prosperity and dominance, and the rights of the polluted were abandoned for the "common good."  Accordingly, any incentive to reduce pollution was removed, and while we did see an enourmous increase in the standard of living in many respects, it came at the cost of the environment.

So, today, as we try to balance our comfortable lifestyles with our environmental concern, we need to ask some important questions.  Is it true, as the economists recommending carbon credits and other plans say, that there is no way for markets to internalize the costs of pollution, or have we simply chosen not to let them?

"Are there any other environmentalists out there who aren't hell bent on making corporations the out to be the sole bad guy in this new wave of environmental awareness?"

Basically I like I am sure other environmentalists have realized are usually lumped into the group of the anti-corporation groupie who wants to find someone to blame and who better but Walmart and Pfizer, the top producers of Chinese plastic trash and over priced prescription drugs!

But hey, these are corporations! The whole point of these companies is to make money so you can't get mad at group of people who have figured out a way to do that.

I won't discuss business practices, I am not talking about waste and dumping, I am talking about the tactics the company uses to become the "best," some of these companies are more like small governments rather than a company.

So who is to blame?

Well, you and me!

I know this may sound bad at first but please hang in there and I will explain.

These companies are there to make money, by making products that the customer wants and let's face it, it's pretty obvious that most people don't want to bother with their stuff, they would rather toss it and buy something new and cooler. There is a lot of buzz about engineered obsolesce and marketing manipulation and how companies use these as ways to "make" us buy more.

I would like to look at this issue with a slight twist, suppose that these companies are producing products that only last the average time that the average user has them and those that tend to hang on to their products for a while are the ones who notice this engineered obsolesce and those that toss their stuff for new stuff are just using it as a convenient excuse?

Be honest how many times have you bought something new to replace something you already had even though the old item was in perfect working order, it just didn't look like everyone else's?

What about market manipulation? Companies are also being accused of forcing us to buy the next cool new product. I like to site this example, take the Ipod everyones best friend, when this product first came out it was an overpriced MP3 player and nothing more, nobody wanted them but Apple continued to advertise them, everywhere (kind of like how Under Armour is doing now, except their product is already popular) and all of a sudden Ipod mania spread like wild fire.

I remember talking with someone who wanted an Ipod back when they had like 1GB as the largest memory capacity and I suggested that instead of him spending $600 on this that he should spend $300 on a palm pilot and not only will it do more but it will have removable memory, but no he had to have his Ipod.

So, is this an example of marketing manipulation, peer pressure or keeping up with the Joneses?

Take the Iphone as another example, before it came out analysts said it would flop, nobody would want it, it looked funny and it wasn't made all that well, plus the compression rate on the originals made the songs sound off to those with sensitive hearing. But... before Apple (aapl) released the Iphone their stock was in the high $80 range (because of the analysts suggestions, before the suggestions apple sock was almost $100 a share), now (01.11.08) Apple stock is $172 a share! I knew there was something I forgot to do in June "07, damn!

I digress, before the Iphone came out and soon after it"s release, it seemed everyone had to have one of these phones, I even talked to one lady who canceled her current contract and switched to AT&T so her and her daughter could get them before all of their friends.

This doesn't sound like market manipulation to me, it sounds like people trying to make their friends feel inferior to them, kinda makes you feel all warm and fuzzy doesn't it?

Let's now talk about engineered obsolesce, when was the last time you took an appliance in to have it fixed? It's just easy and well, cheaper to just toss the old one and then buy a newer one, isn't it? Be honest, we've all done it, I mean having the thing fixed would cost more than buying a new one anyway, right?

This is circular logic, if the customer is willing to have their items fixed when broken and only buys items that can be fixed when broken than companies will be forced to produce products that can be fixed, right? Or else they will go out of business!

But if the customer just tosses the old stuff when it breaks or "obsolesces," as a company owner wouldn't you want to save some money on manufacturing costs (like taiwanese slave labor costs that much!) by cutting back here and there, knowing that the stuff will be tossed rather than fixed. Would you cut back on product quality? Be honest!

It's sort of the chicken and the egg question, which came first, the toss it and forget it mentality or the products that cannot be fixed anyway. Did we become lazy or did corporations make it too much of hassle to fix their products?

I recently saw a video on scavenging, basically people who raid junk yards looking for useful stuff that they can resale. This one guy in the video was saying that after being out of scavenging for some time he decided to give it try again and he got his hands on some washing machines and they had almost no reusable parts on them, everything was molded together as one unit and couldn't be separated to be reused, basically they were designed to be used and tossed, like tissue.

Now we are entering an era of big issues if we don't address them now, namely nanomachines, I know these sound cool, like something out of a spy movie but this is where the fault falls squarely on the corporations, we are now in the era of SMD electronics which are not reusable and cannot be disassembled because these super small semiconductors are sealed in epoxy and no company seems to handling the issues of what happens to these very small microchips once they are no longer being used; nanomachines will only compound this issue.

I recently heard that some of the jewelry coming in from China has similar chemical properties as melted down computer components, which means the Chinese are just selling us back our own junk!

I wouldn't be surprised if a lot of what we get now from China isn't just our recycled junk, this country seems to be taking all recyclables and in any amount you can send. Think about this the next time you buy something that says it's recycled, it still came the same distance as the other stuff, in fact it has probably traveled twice as far, first it had to be thrown away as it's original item and then sent to China and melted down and reformed as the new item and shipped back,where as freshly produced petro-products only travel half a far!

I am not saying that you shouldn't buy recycled, just know where it comes from.

It's easy to blame the companies because they will do whatever is necessary to save money, while bilking us out of ours, but we are the ones who buy the products and one day when we as a human group get through our heads that we are in this game of life together maybe we will band together and either start producing products that can make a positive difference or stop buying from companies who are only after the almighty dollar.

Product information will be the driving force of tomorrows product, sort of like a nutrition information label but it tells you everything you (n)ever wanted to know about the raw material sources for your products.

To end this discussion I would like to say, that if we are unhappy with the products that are being produced, than we the consumer are the ones who have to power to change what these companies produce. One thing that upsets me, is when I see people like Ed Begley Jr. complain about things like the EV one being taken off the market. With all of the pull (and money) this man has you would think that instead of complaining about it and spending so much time and money trying to keep his electric car, why didn't he just rally together with some other activists (with money) and start a car company that produces nothing but electric cars. They could hire movie modelers to design the concept car and even throw a few in a new movie and bam you would have an instant success!

Why not just solve the problem instead of reveling in the issue and not solving anything?

We have the power, we just have to realize it.